Working paper
The Contagion Effect of Accounting Restatements on Strategic Alliance Partners
SSRN
02/01/2023
DOI: 10.2139/ssrn.4344356
Abstract
We investigate restatement contagion to strategic alliance partners, and we document a negative stock price reaction for non-restating firms whose alliance partners announce an accounting restatement. This contagion effect is larger when the institutional bonding between alliance partners is stronger. We also establish that restatements are associated with the market updating alliance partners’ economic outlook. Specifically, we find that restatements trigger downward analyst forecast revisions and increased forecast accuracy for non-restating alliance partners, ruling out the possibility that the downward forecast revisions are primarily driven by uncertainty about allied partners’ reporting quality. Additionally, the downward forecast revisions explain the variation in the observed contagion effect at the time of restatement (and vice versa), after controlling for restatement-level- and firm-level- proxies of reporting quality concerns. Despite limited quantitative disclosure about alliances and a decrease in information about production decisions for alliance participants (Kepler 2021), markets infer significant information about contagion effects of restatements.
Details
- Title: Subtitle
- The Contagion Effect of Accounting Restatements on Strategic Alliance Partners
- Creators
- Cristi A. Gleason - University of IowaNafis RahmanDerrald Stice
- Resource Type
- Working paper
- Publisher
- SSRN
- DOI
- 10.2139/ssrn.4344356
- Number of pages
- 45 pages
- Language
- English
- Date posted
- 02/01/2023
- Academic Unit
- Accounting
- Record Identifier
- 9984414059802771
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